HST and How it Affects Home Purchases

There always seems to be a certain few questions I always hear when they are a hot topic in the media. Lately the big question has been regarding the HST. The question hasn’t really been what effect it has but rather if there was a lot more activity leading up to July 1st with people trying to make a move before the HST starts.

I attribute the way the question is asked to the fact that people don’t really know what the effect is and just assume it’s bad. The reality is that the HST won’t have the tremendous impact on those looking to make a move as people may think. I think that’s likely true of most things the HST will impact because most people would much rather throw their arms up in the air and curse the Government than educate themselves as to how it will impact their bottom line. Don’t get me wrong, I’m not pro-HST, quite the contrary. What I am is pro-education.

Here are a few things the HST WILL NOT impact:

- Resales – there is not tax on a resale home.
- New Home Purchases – there is no tax on new builds less than $400,000.
- Condo Fees – there is no tax on condo fees.

...and a few things the HST WILL impact:

- New Home Purchases – there will be HST charged on new builds more than $400,000, however builders will include the HST in their “sticker price” so there are no surprises – make sure you read your agreement carefully to ensure this is the case.
- Real Estate Commissions – there will be HST charged on real estate commissions whereas it used to be that only GST was charged.
- Legal Fees - there will be HST charged on legal fees whereas it used to be that only GST was charged.
- Default Insurance – if you make a down payment of less than 20% of the purchase amount, you will require default insurance, which the HST will apply to whereas it used to be only PST.

There’s no doubt the HST has an impact on the Real Estate Market. However, on a typical transaction the impact will be in the hundreds of dollars, not the thousands that I think most people believe. If you’d like to see more of what products and services are affected by the HST, there is a very good list that can be found here http://www.rev.gov.on.ca/en/taxchange/pdf/taxable.pdf